Fitch turns negative on Goldman Sachs BDC over credit deterioration

A thinner credit cushion at Goldman Sachs BDC has become a warning light for the broader private credit business. Fitch Ratings on May 15 affirmed GSBD’s BBB- issuer rating and BBB senior secured debt rating, but shifted the outlook to negative after concluding that leverage had climbed, non-accruals were elevated and portfolio stress was still building.

The pressure point is the fund’s shrinking room above its leverage limit. Fitch said GSBD’s gross leverage rose to 1.40x at March 31, 2026, from 1.33x at year-end 2025, while its implied asset coverage cushion fell to 12.4% from 17.8% a year earlier. That puts the fund near the low end of Fitch’s range for the rating category and leaves less protection if more loans weaken.

Fitch also pointed to credit deterioration already visible in the portfolio. GSBD had 11 portfolio companies on non-accrual at quarter-end, and Fitch said non-accruals were 3.2% of the debt portfolio at value and 4.7% at cost. Net realized losses reached 3.6% of the average portfolio at value in 2025, while roughly 10% of first-quarter interest and dividend income came from payment-in-kind income, a sign that some borrowers are not generating enough cash to pay interest in full.

That matters inside Goldman because private credit is judged less by origination volume than by what happens after the deal closes. Analysts, product specialists and senior leaders all have a stake in how aggressively the platform can grow if investors begin to question underwriting discipline, workout skill and transparency. Fitch’s negative outlook does not just bruise one listed fund. It raises the cost of proving that the franchise can absorb credit cycles without eroding returns.

Goldman’s own framing tries to separate current underwriting from older problems. The firm said GSBD represented just over 1.5% of Goldman Sachs’ overall private credit assets under management, and about 58% of the BDC’s portfolio had been originated since the current management team took over in March 2022. Goldman also said the older positions accounted for over 99.5% of non-accruals at cost, suggesting the newest book has not been the main source of losses.

Even so, the latest quarter showed the strain. Goldman Sachs BDC reported first-quarter net investment income per share of $0.22, net asset value of $12.17 per share, down 3.7% from $12.64 at Dec. 31, 2025, and a second-quarter base dividend of $0.32 per share. Fitch’s broader view of the sector explains why that combination drew attention: in a 2025 outlook, the agency said business development companies were facing a deteriorating environment marked by elevated rates, tougher competition, more non-accruals, realized losses and weaker dividend coverage. For Goldman, the message is clear: in private credit, the market is now pricing not just growth, but proof that the portfolio can hold up when the cushion gets thin.